COSATU Submission on the Municipal Infrastructure Investment Framework Presented to the Portfolio Committee on Provincial Affairs and Local Government, 30 August 2000

Table of Contents

Introduction and Purpose Local Government and Development Areas of Agreement Critique and Recommendations The Revised MIIF's Problem Statement

The Revised MIIF Alternative Approach The revised MIIF's Levels of Basic Services COSATU's conception of Basic Services Financial Profile of Municipalities Conclusion

 

Introduction and Purpose

This submission is responding to a final draft of the Revised MIIF document. Local Government has a central role in development process. Municipalities perform an important role in the delivery of service provision. The revised MIIF document indicates that the objectives of the Revised Municipal Infrastructure Investment framework are to:

• suggest a revised framework at all spheres of government for providing municipal services and related grant mechanisms,

• update data pertaining to service delivery backlogs and the cost of overcoming the backlogs,

• rework the financial aspects of the MIIF in regard to (a) municipal cash flow and the relevant grants and subsidies, and (b) households and how this determines the affordable services levels,

• update and propose the institutional arrangements for service delivery, and

• demonstrate how to combine infrastructure investment planning with integrated development planning.

COSATU and SAMWU welcome the opportunity to make a submission on the revised MIIF. Infrastructure provision remains an important tool to improve the material condition of people and overall economic development. This is critical in South Africa due to the legacy of apartheid. The majority of people do not have access to basic services. Local government has a primary responsibility to ensure that the poor communities and the low-income earners have access to basic amenities. The Constitution stipulates that local government should fulfil certain objectives. ( 1 )

The Constitution affirms that these objectives should be achieved within its financial and administrative capacity. Our analysis of this revised MIIF shall be assessed in terms of its ability to empower the local government to fulfil its constitutional obligations.
 

Local Government and Development

The Municipal Infrastructure Investment Framework should be located within the vision and goals of the developmental local government. The Developmental Local Government seeks to use its own resources, authority and capacity to implement development programmes that serve the needs of the poor and the working class. It intervenes in the economy and society to achieve its objectives. State intervention is intended to ensure that that the poor have basic services, job opportunities and transformation of the apartheid geography. The development challenges confronting the municipalities require that the public sector should play a leading role in the provision of basic services. This view is premised on the observation that the private sector’s involvement might erode the ability of the state to fulfil its constitutional mandate. The private sector’s role is largely based on the need to maximise profit. The private sector driven approach on the delivery of services can lead to an increase of prices. This will effectively exclude poor people from accessing services, due to their inability to afford.
 

Areas of Agreement

COSATU and SAMWU appreciate the fact that the Revised MIIF (p. 23) is able to provide a comprehensive picture of the level and form of infrastructure backlog existing in the country, both rural and urban. The revised MIIF states that at present:

• 10 % of urban households and 39 % of rural households have a below basic service level of water,

• 26 % of urban households and 76 % of rural households have a below basic service level for sanitation,

• 21 % of urban households and 68 % rural households have a basic service level for electricity, and

• 18 % of urban households and 53 % of rural households have a below basic service level of waste removal.

COSATU and SAMWU agree with the Revised MIIF’s emphasis on the significant of the Integrated Development Plans in coordinating municipal infrastructure provision. The IDPs provide a viable platform for the participatory and democratic planning process. Stakeholders, including labour, should be involved in the formulation of Integrated Development Plans.

We agree with the revised MIIF (ibid, p.29) that "central to the preparation of effective IDPs’ is that municipalities should prepare IIPs".( 2 ) We further agree with the revised MIIF (p.33) proposal that there is intention to ensure all municipal infrastructure grant programmes are applied to the country as a whole. It is noted that this shall ensure that both rural and urban municipalities should receive annual infrastructure capital transfers from national government and in line with MTEF budgeting procedures.
 

Critique and Recommendations

The Revised MIIF (Bullet 15) asserts that the municipalities can explore a variety of service delivery options to effect their constitutional responsibility. To quote, the revised MIIF asserts that

" In regard to the service delivery framework, municipalities are mandated by the Constitution to "ensure the provision to communities in a sustainable manner" However, many municipalities struggle to finance investment in infrastructure and to manage the delivery of services. The wording of the Constitution is therefore important, while municipalities are responsible for ensuring that services are delivered, they are not required to themselves deliver the services".

COSATU and SAMWU believe that emphasis on the distinction between municipality’s responsibility and actual delivery has serious implications. It can be used to justify a blanket privatisation of state assets. This is usually done without considering the impact of private-sector driven approach on service delivery.

Recommendation

We therefore recommend that addition be made as follows:

"However, the public sector should remain a preferred option for the delivery of services".

This addition shall ensure that other delivery options are explored if and only if the public sector cannot be able to deliver basic services itself. Other delivery options should only be explored as a last resort. The private sector may be brought in for a limited period of less than five years where there are compelling reasons to do so. A decision to involve the private sector should be taken through a participatory and a transparent process. This should be in coherence with the Framework for Restructuring of Municipal Service Provision, entered into between SALGA and SAMWU in 1998. The Agreement (ibid, 6) says:

"In order to carry out their responsibilities, municipalities will need to transform public sector delivery through restructuring process. All parties must be consulted in the process of restructuring. The parties include users of services, the providers of services, workers and the elected local government representatives".

Bullet 16 indicates that:

other agencies such as Water Boards and ESKOM also deliver services within municipalities, most often in rural areas. This is a concern since whereas municipalities provide services in the light of what households can afford to pay all the services, these other agencies provide services to a level that they believe households can afford for that particular service. This lead to a situation where households may have a little money left over to pay for other services and represents a threat to the sustainability of municipal government.

The logic underpinning the Revised MIIF’s proposal that agencies should consider to provide services as informed by affordability principle cannot remain unchallenged. COSATU and SAMWU believe that these agencies should accelerate delivery in rural areas. They should not use an inability of the poor to pay as an excuse to provide sub-standard basic services.

It is correct to assert that the inability to pay services may pose a serious thread to the sustainability of municipal government. However, we believe that the revised MIIF document does not take the issue of cross-subsidisation on board. Cross-subsidisation between urban and rural areas, and high-income earners and low income earners should be used to cover financial shortfalls. It is critical to note that the majority of rural and urban poor cannot access services without cross-subsidisation. The state should use cross-subsidisation to ensure that the rural poor have access to services and to ensure sustainability.

We agree with the proposal suggesting that the Integrated Infrastructure Investment Plans and Integrated Development Plans should be used to facilitate a common approach on service delivery between the municipality and other delivery agents. However, we would like to emphasise that access to service delivery should not be based on the ability to afford. "Affordability" principle would ultimately exclude the majority of poor people who are already excluded. The state has a primary responsibility to ensure universal access to adequate service. There are major social and economic benefits that can be gained if adequate levels and standards of service are provided by the municipality ( 3 ). These socio-economic benefits of delivery of adequate services justify the state to avail resources for infrastructure investment.
 

4.1 The Revised MIIF’s Problem Statement

The revise MIIF (2 000, a) asserts that the de facto shaping of the way infrastructure grants were set up led to the grant for bulk and connector infrastructure via the CMIP also being specified in terms of qualifying households. The CMIP was developed primarily with a view to providing the bulk and connector infrastructure requirements needed to provide new subsidised housing developments with a basic level of service. The Revised MIIF (Ibid, b) argues that this approach had encountered the following problems:

1. In a few cases some services available to better off households that do not qualify for a housing subsidy are below basic. In other cases, the services presently available to low-income households that qualify for a housing subsidy may be available at a full level.
    

2. Many low-income households that qualify for a housing subsidy may live in a backyard dwelling in a fully serviced formal settlement, have access to a full service level and not intend to take up a housing subsidy.
    

3. The means of determining the services backlog is obscured by the fact subsidies available for addressing the backlog come from the housing subsidy. Thus, if 50 % of the households in an area qualify for a housing subsidy, although the number of households that actually have a below basic service will be different and will vary from service to service, the calculation of the funding available for addressing the backlog leads to the perception that 50 % of the households have services backlogs and that the backlog for each service is the same.
    

4. PHB decisions regarding the location of housing projects where services grants are available. This disempowers municipalities that are seeking to provide particular services in particular locations at particular service levels.
    

5. The household subsidy does not constitute a vehicle for delivering services to households that do not qualify for a subsidy, or to certain areas, for example, areas that do not have a growing population and cannot be prioritised for the limited number of available housing subsidies.
    

6. This approach only provides services in packages, which limits flexibility and community choice with respect to individual services.

COSATU and SAMWU concur with these stated observations and furthermore asserts that there is indeed a need to develop alternative mechanism that can ensure that poor urban and rural communities have access to basic services. These structural problems are often acute in rural areas where service backlogs are more profound.
 

4.2 The Revised MIIF alternative approach

We support a shift from households to service oriented approach. The revised MIIF (ibid, c) indicates that" this approach does not focus on households that are eligible for a housing subsidy, but on identifying the backlogs of specific services and providing each, overtime (not in a once-off package), according to households priorities and what they can afford. COSATU and SAMWU believe that this should be done within the overall objective of ensuring that the provision of municipal infrastructure is informed by framework for Restructuring of Municipal Services Provision’s Principles, namely

• Universal access to water, sanitation services, electricity and other basic services.

• Services must be delivered in a way that is environmentally sustainable, efficient and effective,

• All residents should receive a lifeline amount of basic services,

• Principle of cross-subsidisation to be used to allow for an affordable service,

• Democratic practices and accountability to residents and users must be established,

• Resources must be in an effective and efficient manner,

• Planning must be done in a sustainable manner.

We are concerned that the revised MIIF does not necessarily explore the principle of cross-subsidisation to enhance sustainability. It dwells heavily on cost- recovery principles that would probably exclude the majority of people. It will alternatively lead to a scenario where the poor will only enjoy services that do not meet health and environmental conditions. We further believe that the constitution mandates the local government to ensure that there is universal access to basic services. It is therefore problematic for the Revised MIIF to suggest that access to services should be determined by affordability. COSATU believes that the proposed levels of "basic services" do not meet health and environmental standards.
 

4.3 The revised MIIF’s Levels of Basic Services

We further believe that the revised MIIF’s definition of "basic service" is problematic. It does not really take into consideration that it will never really fulfil "environmental and health conditions" as proposed. The most critical omission is its inability to consider whether its conception of "basic services" fulfil public health and environmental conditions stipulated in the RDP. This is despite the fact that studies have reflected the health and environmental implications of such proposed basic services.

The revised MIIF (ibid, p.5) proposes the following service levels:

	Basic services	Intermediate	Full Services Low Income	Full Services High Income
Water	Communal standpipes	Yard taps	In house	In House
Sanitation	Ventilated Improved pit latrines	Full waterborne	Full waterborne	Full Waterborne
Electricity	5/8 Amp supply	Pre-paid 20\30 Amp supply	60 Amp supply	60 Amp Supply
Roads	Graded	Gravel	Paved	Paved
Storm water	Earth lined open channel	Open Channel	Piped systems	Piped Streams
Refuse Removals	Communal	Kerbside removal	Kerbside removal	Kerbside removal

The revised MIIF (ibid, c) suggests that every municipality should seek to ensure that all residents enjoy at least a basic level of each of the five services, and higher level if they can afford. The revised MIIF fails to use its mandate to redefine what is minimum standard that caters for health and environmental conditions. There are various social and economic implications associated with the proposed basic standards.

"Although the MIIF’s pit latrines are a major improvement compared with no sanitation, there would also be health benefits- mainly reducing diarrhea, a major killer of children- if government installed flush toilets and raised the standards of other forms of infrastructure" ( 4 ) The paper further indicates that the environment concerns have also arisen, in part because densely-packed latrines in urban areas are likely to contaminate local water supplies, requiring expensive purification and low quality storm water drainage could also lead to flooding, erosion and the washing of human waste into surface water.

The proposal for communal taps in rural areas does not take into consideration problems associated with it. There is high level of contamination of water when inappropriate vessels are used to fetch water from communal taps to households. It is further noted that 8 Amp suppliers are not enough to provide cooking and space heating. This will therefore have negative health implications because households will continue to use wood and coal as alternative forms of energy. The usage of wood in rural areas will lead to environmental degradation through de-forestation. We should note that it is difficult to upgrade the preferred levels of basic service once they are implemented.
 

4.4 COSATU’s conception of Basic Services

COSATU and SAMWU argue that an alternative conception of basic service should be adopted. Such conception should be tested on its ability to fulfil health and environmental conditions stated above. An effective service provision has an overall positive impact on socio-economic development. The state is required to commit resources to ensure that universal access.

COSATU and SAMWU propose the following levels of service:

Service	Urban level	Urban lifeline tariff	Rural level of service	Rural lifeline tariff
Water	Single-metered yard tap linked to wet core	First 50 litres free, the rest billed with block tariff	Metered yard connection	First 50 litres free, the rest billed with inclining block tariff
Sanitation	Low-flush full water bone	See above	50-50% septic tank\ waterborne sanitation	See above
Electricity	20 amps	First 100 kWh Free via card	85 % at 20 am, 15 % non grid	First 100 kWh free via card
Roads	Surfaces	Included in rates	All weather access roads within 5 00 meters of site	Included in rates
Storm water	Channels with piped crossings	Included in rates	Open drains	Included in the rates
Refuse	Kerbside	Included in rates	Communal rubbish dumps	Included in rates

Source: Infrastructure Investment and the Integration of low-income people into the economy" by Patrick Bond and the Infrastructure Research Team, University of Witwatersrand, Graduate School of Public and Development Management

COSATU and SAMWU believe that the material well being of the poor and the overall socio-economic goals of the country can be enhanced if a lifeline tariff approach is adopted. This is already recognised in the Municipal Systems Bill. Once the lifeline amount has been provided, the service should be charged for on the basis of a block tariff. It is noted that municipalities cannot achieve the levels of service outlined above unless they receive an additional funding from central government. We believe that central government should provide funding for infrastructure and service subsidies to meet the developmental mandates of local government. An increase in local government financial allocations shall also reduce their reliance on the private sector to deliver basic services. Web propose the establishment of a nationally driven cross-subsidisation from industrial, service-sector, mining and agricultural bulk users of water and electricity, to low-income residential consumers ( 5 ). Municipalities can also implement cross-subsidisation within municipal areas, from richer to poorer communities.

We are not convinced that the principle of "cost recovery" will help in terms of ensuring the poor have access to the basic services. This is also based on the Revised MIIF assertion (2 000, 24) that:

The objective of government policy is to provide households with at least a basic services level, but then the aim (is) is to deliver higher services levels, depending on what and households can afford. In effect, households should have at least a basic services level and should pay according to their ability.

COSATU and SAMWU agree with this principle, however the minimum basic services as defined in the Revised MIIF do not meet environmental and health conditions. It is important to come with the criteria of basic services that meet such conditions as a prerequisite to enforce the principle.
 

4.5 Financial Profile of Municipalities

Local Government has generally faced a huge financial flow crisis in South Africa. This phenomenon poses a serious challenge in terms of service delivery. The Local government’s allocations from national fiscus had declined, while the municipalities are mandated by the Constitution to coordinate development process. It is therefore critical to ensure that government ensures there is an increase of financial allocations to assist its local sphere in fulfilling its constitutional mandate. While we are not objecting to other alternative approaches to service delivery, however these alternative approaches should not be used to abdicate the responsibility of state to play a central in service delivery. This is informed by the fact that service cross-subsidisation is likely to affected during corporatisation. Services that generate profit will attract private investment, while non-profit services are likely to remain under public control. We believe public sector driven delivery can ensure that the principle of service cross-subsidisation at municipality level remains intact.

This is critical especially when it is indicated that "If Municipal Service Partnerships are not required to generate income for cross-subsidy purposes then the effect of creating independent institutions for service delivery can have profound negative financial implications" ( 6 ). The private sector participates in service delivery for profit accumulation, rather than to ensure that poor communities and households have access to services. COSATU and SAMWU believe that public sector delivery option will resolve this dilemma in the sense that cross-subsidisation of services can be coordinated.
 

Conclusion

COSATU and SAMWU believe that the current infrastructure backlog can only be resolved if the state plays a significant and a leading role in infrastructure development. It further believes that the state has an obligation to ensure that there is universal access to basic services. However, COSATU and SAMWU are concerned that the definition of basic service does not address health and environmental conditions and therefore it should be redefined.

We further believe that a nationally driven cross-subsidy system should be used to fund shortfalls that can be encountered by the poor communities and municipalities

 

Footnotes:

1. The objects of local government are:

   (a) to provide democratic and accountable government for local communities,
   (b) to ensure the provision of services to communities in a sustainable manner,
   (c) to promote a social and economic development
   (d) to promote a safe and healthy environment, and
   (e) to encourage the involvement of communities and community organisations in matters of local government.

2. The Revised MIIF indicates that IIPs’ is the most significant part of the IDP because (1) the five major municipal infrastructure services constitute such a large proportion of municipal expenditure, the provision of affordable services will therefore impact directly on the overall sustainability of a municipality and is the most significant part of its financial planning and budgeting, municipal infrastructure issues such as service backlogs, upgrading of infrastructure, maintenance, service payments or non-payment, service standards and levels of service can play a major role in triggering local economic development, improving health and addressing poverty eradication, and the strategic installation of bulk infrastructure can address issues of spatial integration and restructuring the built environment by the release of strategically located serviced land.

3. (a) improvement in health and education amongst the poor
   (b) reduction of poverty and social inequalities,
   (c) enhancing local economic development,
   (d) environmental sustainability.

4. Patrick Bond (1997) Implications for Social Policy, Local Governance and Social Movement: a paper Presented to the Urban Sector Network.

5. Bond, P (Draft, 1996) Why Government plans for service provision must be fundamentally rethought.

6. The Revised MIIF, p.18

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